In the last five years, the Australian Listed Investment Company (LIC) sector has grown at a rapid pace to reach a market capitalisation of over $26 billion. The last year alone saw 15 new LIC offerings and total capital raised touching $1.5 billion. LICs continue to be a popular investment choice for investors on the hunt for dividends in an environment where other asset classes have been struggling to provide similar levels of yield.
In October 2014, I wrote an article about why LICs trade at premiums or discounts to net tangible assets (NTA). In the last three years, the overall LIC sector discount to NTA has narrowed significantly, driven by many factors, including the increased popularity of LICs following the introduction of the FOFA (Future of Financial Advice) reforms and the proliferation of SMSFs. There still remains a small part of the sector trading at a discount to their NTAs, and as a result, we have seen the number of capital management initiatives increase compared to previous years.
In an article for Cuffelinks, I discuss capital management techniques in LICs.
To read the full article, click here.